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City of Mounds View Staff Report July 2, 1998 Page 2 but that there would not be a substantial reduction in land needed. FINANCIAL ANALYSIS City staff and financial consultant have been reviewing the financial side of the project. The following are some of the key conclusions of that analysis: • The developer has requested a total of$1,700,000 of up front TIF assistance. Any land acquisition costs over and above $800,000 would be added to the $1,700,000. • There are not$1,700,000 of available funds in the TIF pool. Bonds would have to be sold or the city would have to borrow against other city funds to raise the amount necessary. • The tax increment districts will expire in 2015. • The project as proposed(not including the second phase of the hotel) would generate approximately $218,500 of annual tax increment. • $218,500 would support a taxable revenue bond sale of approximately $1,900,000 which would provide net proceeds to the developer of$1,525,000. A delay in project completion would reduce the number years of increment available which in turn reduces the amount of the bond sale and the proceeds available to the developer unless the developer makes a payment in lieu of taxes. • Using similar assumptions, a bond issue of$2,120,000 would be required to provide net proceeds to the developer of$1,700,000. Annual tax increment of$245,000 would be necessary to support a bond sale of$2,120,000. • Depending on the use of the bond sale proceeds,the city could issue a combination of taxable and tax exempt bonds to obtain a better interest rate. This would increase the amount of bonds that the projected annual increment could support. • According to the latest TIF cash flows completed by the city finance department,there are between$235,000 and $920,000 a year available for projects such as Highway 10 redevelopment, business improvement loans, and housing programs. Administrative costs must also be paid from these funds. $50,000 to $500,000 a year have been allocated for Highway 10 redevelopment projects. These funds could be used to assist this project. REQUESTED ACTION At the work session on Monday, staff will present the details of a scenario to make this project work. The scenario will include the issuance of a combination of taxable and tax exempt bonds, and allocating Highway 10 redevelopment funds to the project. Staff will be looking for specific direction from the City Council concerning the project and the proposed financing scenario. Rick Jopke, Co unity Development Director